Tony Blair has defended the government's controversial policy of student top-up fees.

The move came after the prime minister delivered a stark message to members of the Parliamentary Labour Party.

While he said he was open to "debate" on public service reform, he refused to cave in to demands for a U-turn on foundation hospitals and student top-up fees.

Speaking in the Commons the prime minister stood firm in the face of criticism from both Tory and Labour MPs.

"I'll explain the reason why graduates will pay more income tax, it's because they are earning a great deal more money, about 50 per cent more," Blair said.

"And the choice is very simple: we either get more funds to university and have a fair system where no-one pays money upfront, or we adopt the Conservative policy which will result, according to the Institute of Education, in a cut of 100,000 students every year."

The intervention followed reports that ministers have been warned of a possible defeat over their top-up fees policy.

But a Number 10 spokesman rejected claims of a rethink. "In terms of the policy the prime minister believes absolutely that it is the right thing to do," said a spokesman.

Downing Street added that the government had a responsibility to encourage university access, coupled with providing the increased funding required by Britain's universities.

After Blair's uncompromising performance, a senior Labour MP said he was correct to stick to his course.

"If you go on changing policy all the time, all you end up with is a hiatus," he said.